For decades, one of the biggest dreams pursued by most of the individuals has been to save enough money to buy a house they can call their own. They work extra shifts, cut down costs, make lifestyle changes, etc. all in the name of saving for their dream house. However, with the increase in the number of financial establishments offering loans now, it has become easier to take a loan.
Now, the question becomes whether to use your own money- the money that you have saved right from your first salary- or to avail any of the home loans that you are eligible for.
The answer is to opt for the loans. Yes, it may seem counterintuitive to opt for a loan for which you will have to pay an EMI for quite a few months. However, when you look at the immediate as well as future benefits, the argument in favour of opting for a loan holds sway. If you are still not convinced by the benefits of opting for a loan, instead of using your saved-up funds for buying a new house, then read on for some further substantial points:
- Tax Benefits
Section 24 of the Income Tax Act allows for a deduction of Rs. 2, 00, 000 on your interest on your house loan under certain conditions such as- if you are using the house for which loan was taken as residence. Furthermore, under the Section 80C of the same Act, you can claim additional deductions. Thus, your total tax liability is drastically reduced. If you will be using the said house for renting, then there are tax benefits for that, too.
- No restriction on loan amount
You could go above and beyond your savings amount when you opt for a loan. This automatically means that you have more options to look at. With a higher budget, you can look at bigger or better places that you may have foregone considering their higher price tags. Opting for a loan helps you bridge the gap between what you have and what you want while buying a house.
- Build your credit history
You may have enough money now for your needs, but what happens if you need to take a loan in the future? Be it for a car or business or even personal reasons, you may need to take a loan in the future. For that, you will need to prove your credit worthiness. When you take a loan, and repay the instalments on time it helps to build your credit worthiness. So, when you apply for a loan in the future, the lender can easily sanction your loan amount based on your credibility.
- Saving for an emergency
Financial emergencies can come knocking any time. That’s why, we need to ensure that we have adequate liquidity for such scenarios. Putting all our money in one place may not be wise.
Now that you know why taking a loan for your new house can be a good idea, weigh the pros and cons carefully before making the final decision.